TaxTMI 
TaxTMI 
2008 (1) TMI 61
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.... the livestock and, therefore, it was stock-in-trade of the assessee and the income from the sale of such stock- in-trade is liable to tax. Thus, the Assessing Officer treated the calves to be stock-in-trade and assessed it to tax. 3. Being dissatisfied with the aforesaid order the assessee preferred an appeal and the appellate authority dislodged the finding of the Assessing Officer and deleted a sum of Rs. 68,000. 4. Being aggrieved by the order passed by the appellate authority, the Revenue preferred an appeal before the Income-tax Appellate Tribunal (for short "the Tribunal") which concurred with the view expressed by the appellate authority. 5. We have heard Mr. Rohit Arya, learned senior counsel along with Mr. S. Lal for the Revenue, and Mr. Sumit Nema and Mr. Mukesh Agrawal, learned counsel for the respondent-assessee. 6. Mr. Rohit Arya, learned senior counsel assailing the impugned orders submitted that the appellate authority as well as the Tribunal has fallen into serious error by coming to hold that no capital gain arose as there was no cost in acquisition though in the instant case, the question involved was whether the calves which form a part of the livest....
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....bringing them into existence inasmuch as all the expenditure is in the nature of revenue expenditure such as fodder, medicines, etc., which are already claimed as deductible expenditure in the profit and loss account and there is no direct capital expenditure which can be attributed to give birth to the calves. Learned counsel contended that the entire expenses related to production of milk which has been shown as income from sale of milk and, therefore, the Tribunal has correctly concurred with the finding of the first appellate authority. It is highlighted by Mr. Nema that the tax effect in the instant case is less than Rs. 50,000 and as per the Central Board of Direct Taxes instructions dated October 28, 1992, the monetary limit for filling of appeal or reference before the High Court has been fixed at Rs. 50,000 and the Central Board of Direct Taxes instructions are binding on the Revenue and hence, the appeal deserves to be dismissed on that score also. 8. To appreciate the submissions raised at the Bar it is apposite to refer to the concept of stock-in-trade and the concept of business. In H. Mohmed and Co. v. CIT [ 1977]107 ITR 637 (Guj), while dealing with the concept of....
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....in the obtaining factual matrix calves form a part of stock. Certain conditions which emerge in the present case are that the assessee is engaged in the business of sale of milk and cows constitute an asset for production of milk; that the primary motive to have the cows is for production of milk; that the income is from sale of milk and all expenses and maintenance like fodder and medicines are designed to obtain milk; that the calves which have been sold are male and they cannot produce milk which is the business activity of the assessee. Two aspects are to be taken into consideration, namely, (1) the expenses made by the assessee to maintain the cows has already been put in the compartment of profit and loss account; and (2) the calves came into existence in the aforesaid process. 15. First we shall advert to the facet whether the calves under the aforesaid fact foundation can be regarded as stock-in-trade. From the facts that have been exposited, it is discernible that the business of the assessee relates to sale of milk and the female cows constitute the asset and they are exploited for production of milk. The primary motive of the assessee is to fertilise the cows so that ....
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....his personal asset to the partnership firm, there can be no reckoning of the liabilities and losses which the firm may suffer in the years to come. All that lies within the womb of the future. It is impossible to conceive of evaluating the consideration acquired by the partner when he brings his personal asset into the partnership firm when neither can the date of dissolution or retirement be envisaged nor can there be any ascertainment of liabilities and prior charges which may not have even arisen yet. Therefore, the consideration which a partner acquires on making over his personal asset to the firm as his contribution to its capital cannot fall within the terms of section 48. And as that provision is fundamental to the computation machinery incorporated in the scheme relating to the determination of the charge provided in section 45, such a case must be regarded as falling outside the scope of capital gains taxation altogether." 18. The submission of Mr. Nema is that in the present case the cost of acquisition of calves cannot be ascertained because there are no expenses directly attributable towards bringing them into existence. All the expenditure has to be treated as reve....